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RELATED PARTY TRANSACTIONS
 12 Months Ended
Dec. 31, 2024
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS RELATED PARTY TRANSACTIONS
Related party assets and liabilities included in the Company’s consolidated balance sheets as of December 31, 2024 and 2023 consisted of the following (in thousands):
20242023
Related Party Assets:
Contract assets (see Note 3)
$100,793 $69,068 
Operating lease right-of-use asset (see Note 12)— 14,040 
Other
877 862 
$101,670 $83,970 
Related Party Liabilities:
Reimbursement obligation
$62,057 $59,378 
Payable to holders of Management Company’s Class B interests
— 1,828 
Operating lease liability (see Note 12)— 10,974 
Accrued advisory fees125 4,725 
Other
1,115 1,169 
$63,297 $78,074 
Development Management Agreement with the Great Park Venture (Incentive Compensation Contract Asset)
In 2010, the Great Park Venture, the Company’s equity method investee, engaged the Management Company under a development management agreement to provide management services to the Great Park Venture. The initial term of the development management agreement with the Great Park Venture expired on December 31, 2021 but had been extended by mutual agreement of the parties through December 31, 2022. The compensation structure in place consisted of a base fee and incentive compensation. Incentive compensation is characterized as “Legacy Incentive Compensation” and “Non-Legacy Incentive Compensation.” Legacy Incentive Compensation consists of a maximum of $9.0 million of incentive compensation payments attributed to contingent payments made under a cash flow participation agreement to which the Great Park Venture is a party. Holders of the Management Company’s Class B interests are entitled to receive distributions from the Management Company that are attributable to any Legacy Incentive Compensation received by the Management Company. Non-Legacy Incentive Compensation is 9% of distributions available to be made by the Great Park Venture to holders of Percentage Interests of the Great Park Venture during the Initial Term (see Note 4).
In December 2022, the Company and the Great Park Venture extended the A&R DMA through the First Renewal Term. The compensation payable to the Company during the First Renewal Term continued to include a base fee and incentive compensation payments. In September 2024, the Company and the Great Park Venture further extended the A&R DMA through the Second Renewal Term. The compensation payable to the Company during the Second Renewal Term includes a revised annual fixed base fee beginning in 2025 and incentive compensation payments. The incentive compensation provisions of the A&R DMA remain unchanged through the Second Renewal Term. If the A&R DMA is not extended by mutual agreement of the parties beyond December 31, 2026 and the Company is no longer providing management services subsequent to December 31, 2026, the Company will continue to be entitled to 6.75% of distributions paid thereafter.
During the year ended December 31, 2024, the Great Park Venture made Legacy Incentive Compensation payments to the Company of $1.8 million and Non-Legacy Incentive Compensation payments of $49.1 million. Upon receiving the Legacy Incentive Compensation payments, the Company distributed the $1.8 million in proceeds to the holders of the Management Company’s Class B interests. During the year ended December 31, 2023, the Great Park Venture made Legacy Incentive Compensation payments to the Company of $4.9 million and Non-Legacy Incentive Compensation payments of $41.6 million. Upon receiving the Legacy Incentive Compensation payments, the Company distributed the $4.9 million in proceeds to the holders of the Management Company’s Class B interests. As of December 31, 2024, the holders of the Management Company’s Class B interests had no further distribution rights.
For the years ended December 31, 2024, 2023 and 2022, the Company recognized revenue from management services of $96.0 million, $47.2 million and $31.0 million, respectively, related to all management fees under the A&R DMA, and such revenues are included in management services—related party in the accompanying consolidated statements of operations and are included in the Great Park segment. At December 31, 2024 and 2023, included in contract assets in the table above is $99.2 million and $66.1 million, respectively, attributed to incentive compensation revenue recognized but not yet due (see Note 3).
Operating Lease Right-of-Use Asset and Operating Lease Liability
In December 2024, the Gateway Commercial Venture, the Company’s equity method investee, sold its remaining interests in the Five Point Gateway Campus (See Note 4). The Company leases corporate office space in the building previously owned by the
Gateway Commercial Venture at the Five Point Gateway Campus (See Note 12). Upon completion of the asset sale, the Company’s lease agreement for the corporate office space at the Five Point Gateway Campus continued with the third party buyer.
Reimbursement Obligation
Prior to the Company’s acquisition of the San Francisco Venture, the San Francisco Venture completed a separation transaction (the “Separation Transaction”) pursuant to an Amended and Restated Separation and Distribution Agreement (“Separation Agreement”) in which the equity interests in a subsidiary of the San Francisco Venture known as CPHP Development, LLC (“CPHP”) were distributed directly to the Class A members of the San Francisco Venture: (i) an affiliate of Lennar and (ii) an affiliate of Castlelake.
The San Francisco Venture has entered into reimbursement agreements for which it has agreed to reimburse CPHP or its subsidiaries for a portion of the EB-5 loan liabilities and related interest that were assumed by CPHP or its subsidiaries pursuant to the Separation Agreement. Interest totaled $2.7 million, $2.7 million and $3.0 million for the years ended December 31, 2024, 2023 and 2022, respectively. All of the incurred interest for the years ended December 31, 2024, 2023 and 2022 was capitalized into inventories. The weighted average interest rate as of December 31, 2024 was 4.6%.
Pursuant to a reimbursement deferral agreement, principal and interest payments under the related party reimbursement obligation are deferred through March 31, 2025. Additionally, throughout 2024, the Company was notified by CPHP or its affiliates that certain payments that were previously expected to be paid by CPHP or its affiliates in 2024 had been deferred to 2025 and 2026. These deferred amounts continue to incur interest at the original interest rate. Principal payments of $57.5 million and $1.2 million are expected to be paid in 2025 and 2026, respectively, however, additional deferral notices may further extend the expected payment dates.
Employment Transition Agreement and Advisory Agreement with Emile Haddad
On August 23, 2021, the Company and the Company’s then Chairman, Chief Executive Officer and President, Emile Haddad, entered into an employment transition agreement pursuant to which, effective as of September 30, 2021, Mr. Haddad stepped down from his roles as Chairman, Chief Executive Officer and President. Mr. Haddad remained a member of the Company’s Board of Directors serving as Chairman Emeritus. Concurrently, the Company also entered into an advisory agreement with Mr. Haddad for an initial term of three years, which became effective on October 1, 2021 and expired on September 30, 2024. Mr. Haddad received an annual retainer of $5.0 million, and his unvested equity awards continued to vest in accordance with their terms, subject to continued service as an advisor or member of the Company’s Board of Directors. At December 31, 2023, included in accrued advisory fees in the table above is $3.6 million attributed to the initial term of Mr. Haddad’s advisory agreement (see Note 2).
In December 2024, the Company and Mr. Haddad entered into a first amendment to the advisory agreement. Under the first amendment, the advisory agreement has been extended for a term of four years from December 1, 2024 through December 1, 2028 (the “Extended Term”). During the Extended Term, Mr. Haddad will receive an annual retainer of $1.5 million and an annual performance bonus of $1.0 million that is contingent upon the occurrence of certain vesting events. The Company incurred expense of $0.1 million related to the Extended Term for the year ended December 31, 2024, which is included in selling, general, and administrative expenses on the accompanying consolidated statement of operations.
Employment Transition Agreement and Advisory Agreement with Lynn Jochim
On February 9, 2022, the Company entered into an employment transition agreement with Lynn Jochim, the Company’s former President and Chief Operating Officer. Pursuant to the agreement, Ms. Jochim agreed to continue in her then current positions, at her then current compensation levels, until February 14, 2022. Concurrently, the Company also entered into an advisory agreement with Ms. Jochim for an initial term of three years, which became effective on February 15, 2022. Pursuant to the advisory agreement, the Company agreed to pay Ms. Jochim an annual retainer of $1.0 million. At December 31, 2024 and 2023, included in accrued advisory fees in the table above is $0.1 million and $1.1 million, respectively, attributed to Ms. Jochim’s advisory agreement (see Note 2).
Valencia Purchase and Sale Agreements
In 2024, the Company entered into a purchase and sale agreement with an unaffiliated land banking entity for the sale of 179 homesites on approximately 31 acres at the Company’s Valencia community. Initial gross proceeds were $76.9 million, representing the base purchase price. Lennar retained the option to acquire these homesites in the future from the unaffiliated land banking entity and has historically exercised its options to acquire such homesites.
In 2023, the Company entered into a purchase and sale agreement with an unaffiliated land banking entity for the sale of 583 homesites on approximately 46 acres at the Company’s Valencia community. Initial gross proceeds were $101.8 million, representing
the base purchase price. Lennar retained the option to acquire these homesites in the future from the unaffiliated land banking entity and has historically exercised its options to acquire such homesites.
Gateway Commercial Venture Property Management Agreement
The Company previously entered into a property management agreement with Gateway Commercial Venture in which the Company provided certain property management services to the Five Point Gateway Campus. In each of the years ended December 31, 2024, 2023, and 2022, the Company recognized revenue from these management services of $0.4 million, which is included in management services—related party in the accompanying consolidated statements of operations. In December 2024, the Company’s property management agreement with the Gateway Commercial Venture was terminated, and the Company is no longer managing any commercial operations at the Five Point Gateway Campus.